To Resurrect Certain Downtowns It May Take More Than Workers Returning to the Office

A recently updated study out of the University of California, Berkeley’s Institute of Governmental Studies has some bad news for CRE property owners in traditional downtown areas: pandemic recoveries are taking a longer time than those of other areas in cities. And the future without some significant changes isn’t looking favorable.

Using mobile phone data rather than the more traditional ones of office vacancy rates, public transportation ridership, and retail spending, the researchers looked at visits to 62 downtown areas in the largest cities in the U.S. and Canada.

“We find wide variation in the extent of recovery, with activity ranging from a low of 31% of pre-pandemic levels in San Francisco to a high of 135% in Salt Lake City,” the researchers wrote.

They continued to say that, as of the fall of 2022, the key factors correlated with improved recovery rates for downtowns were lower commute times and the presence of economic sectors such as accommodation, food, health care, and construction, creating an economic infrastructure. “To survive in the new era of remote work, downtowns will need to diversify their economic activity and land uses,” they wrote.

In other words, if the factors that seem to lead toward better recovery include more convenient commutes, given the realities of housing costs and commute times, the area most open to directed change would be an improvement of economic diversity.

Large metro older and denser downtowns that depend on professional or tech workers may need significant reinvention, said the researchers.

“In general, places with a higher share of employment in knowledge-based industries and occupations, and/or more highly paid workers, are more likely to shift towards remote work,” they wrote. “Surveys suggest this shift will be permanent for up to half of the workforce in cities that are large and congested (e.g., New York), or powered by the tech sector (e.g., San Francisco). This new increase in remote work may result more from long-term trends related to the affordable housing crisis in leading urban centers and the shortage of highly skilled labor than from the pandemic.”

Metro downtowns slowest to recover may need to reinvent themselves. “Most importantly, downtowns should look to diversify their economies to focus on resilient sectors such as education, health, and government,” they added. “Cities could help developers convert older (Class B and C) office buildings to residential, institutional, and recreational uses.”

Also important is to recreate downtowns to favor people. “This could mean creating outdoor spaces with cultural events; rethinking streets for transit, bikes and pedestrians; moving parking to the outskirts of downtown; and attracting diverse segments of the population to visit (both in terms of age and race/ethnicity). Unlike past recoveries, this may take significant public-private collaboration to accomplish, given the extensive intervention required to remake space.”